‘Mining’ plays a very crucial role in Bitcoin (BTC) trading and for beginners who intend to take mining as a fulltime profession, it is an essential to use effective tools to improve winning chances.
Needless to say Bitcoin mining requires basic understanding of market functioning and business acumen and an eye to understand underlying trend. Generally speaking, you could try mining cryptocurrencies using a CPUs (central processing units), GPUs (graphic processing units), FPGA (field-programmable gate array), or ASIC (application-specific integrated circuit) machine.
Apart from the above various other electronic apparatus are needed to send/receive data at super speed and most importantly uninterrupted power source for carrying out seamless computational process.
Earlier, Bitcoin users could join the mining rig with their personal computers. Nowadays, profitable mining requires the use of highly specialized mining rigs. Since solo mining is very difficult, many miners opt to join a mining pool to increase their chances of getting a block reward, which is then shared proportionally between pool members.
Bitcoin mining ensures that the blockchain is up-to-date with legitimate transactions. When a new Bitcoin is created – after other network users of node verify and confirm its validity – it is the miners responsibility to collect, new as well as pending transactions and group them into a new, verified candidate block.
The goal of a miner is to find a valid block hash for their candidate block. A block hash begins with certain amount of a zeros. It is a string of numbers and letters that functions as a unique ID for each block. The miner would gather the hash of previous block to create new hash. A valid block hash proves that the miner did the necessary work to validate their candidate block (hence Proof of Work).
As soon as a miner finds a valid hash, they can validate their candidate block and collect the bitcoin rewards. Each new block provides the respective miner a block reward, which consists of newly generated bitcoins (block subsidy) plus transaction fees.
Earlier, the Bitcoin block subsidy started at 50 BTC in 2009 and is being reduced in half every 210.000 blocks (roughly four years). It halved to 25 BTC in 2012, then to 12.5 BTC in 2016, and finally to 6.25 BTC in 2020. Next halving event is expected to occur in 2024.
The initial investment for profitable mining is very high, and there are many risks involved. Returns are also linked to market conditions and external factors such as energy prices and hardware improvements.
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Laxmikant Khanvilkar
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